Change in insurance law may raise rates

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If you receive a form letter from your auto insurance company, don't toss it in the trash.

Drivers throughout Georgia are being notified about a new insurance law that takes effect today. It creates an option called "Uninsured Motor Vehicle Coverage (Excess)," which will be listed on insurance cards as "UE."

Unless you send a form to your insurer saying you don't want this coverage, you will be automatically switched to it.

Georgia Insurance Commissioner John Oxendine said the law may benefit some consumers, but he doesn't like the way it was written.

"Philosophically, I'm against the government forcing people to buy higher coverage. I think it should have been ‘opt in' instead of ‘opt out,'" he said.

"The new coverage is better, there's no question about it. But the other side of that is most companies will be charging more."

Currently, the minimum coverage required in Georgia is known as the "25/50/25" rule. Drivers must carry bodily injury liability coverage of $25,000 per person, or $50,000 per accident, and property damage liability of $25,000.

But this amount of coverage is not adequate for a serious accident. Hospitalization for trauma can easily cost more than $25,000, and cars are very expensive to repair these days.

That means that if someone hits you and they're carrying only the minimum coverage, their insurance company won't pay all of the bills.

Before the new law went into effect, the at-fault driver's minimum coverage would be subtracted from yours. In other words, if you had a policy with a $100,000 limit and you were hit by a driver who had $25,000 in coverage, your own insurance company would pay only $75,000.

Under the new UE category, the two amounts would be combined, so you would have $125,000 in liability coverage available to you.

But in order to pay for this extra protection, your premium may be increased.

By how much? The letter from your insurance company probably won't specify a dollar amount. Instead, drivers are encouraged to consult with their insurance agent, since individual policies vary.

"This law will force people to take a look at their coverage," said David Colmans, executive director of the Georgia Insurance Information Service, a trade association. "Ideally, you should be going to your agent every two years to review your coverage, making sure it's not too much or too little."

For most consumers, the Uninsured Motorist portion of their policy will go up about $10 to $20 if they accept the new coverage.

Colmans said it's a misnomer to refer to the coverage as Uninsured Motorist.

"It's really about drivers who are underinsured," he said. "They have coverage, just not enough. If the at-fault driver has no insurance at all, then the only coverage available to you is from your own company. That's not going to change."

Though it might have been more logical to increase the mandatory minimum coverage in Georgia instead of asking safe drivers to pay more, Colmans said that may not have been politically feasible.

"Increasing the minimum coverage is a battle in every state because legislators don't like doing that," he said.

Oxendine said the new law, which was introduced as part of Senate Bill 276 last year, was supported by the trial lawyers. "They like it because in a lawsuit, it gives them more coverage to go after (by combining the two policies)," he said.

Colmans said he thinks the majority of Georgia drivers will end up with the increased coverage category, sometimes inadvertently.

"A lot of people will just throw the (insurance company's) letter away, I'm afraid," he said. "Then when their rate goes up, they're going to call their agent asking what's going on."

Fortunately, Colmans said, an agent can easily switch the coverage back to a smaller amount if the customer requests it.